Have you heard about conversion to CIO status and wondered whether it is worth it? The conversion process is becoming popular for charitable companies and community interest companies who want to simplify their administrative burden, streamline regulation and operate as a charity. That said a CIO is not the right model for every organisation and careful consideration is needed before making the switch.

Background

In England and Wales, Charitable Incorporated Organisations (CIOs) came into effect on 4 March 2013. However, it was not until 1 January 2018 that statutory regulations were introduced allowing existing charitable companies and community interest companies (CICs) to convert to CIO status. Until then, if a charitable company or a CIC wanted to become a CIO they had to register a new CIO, transfer all of its assets and liabilities to the new CIO, then close the “old” organisation. The joy of conversion is that it “magically” transforms the existing charitable company or a CIC, into a CIO – no need to transfer assets and liabilities or close the “old” organisation.

Why convert?

Converting to a CIO offers a range of practical advantages, particularly for charities looking to simplify their administration while preserving their charitable purpose.

1. Administrative simplicity

One of the most immediate benefits of CIO status is streamlined regulation. CIOs are registered only with the Charity Commission, removing the need for dual filing with Companies House. This simplification can save trustees and staff considerable time and reduce administrative burden over the long term.

2. Charitable status and tax benefits

For CICs, conversion to a CIO brings full charitable status. This unlocks valuable tax advantages, including Gift Aid eligibility, charitable rates relief, and potential VAT exemptions, all of which can significantly strengthen your organisation’s financial sustainability.

3. Continuity and practical ease

The statutory conversion process has been designed to promote continuity and minimise disruption. A charitable company retains the same charity number, and in most cases, bank accounts can remain in place, and existing contracts, grants, and other operational arrangements usually transfer without difficulty to the CIO.

What to watch out for

Although the conversion process is designed to be as smooth as possible, there are some important matters to consider:

• Loans and financing

  If your organisation has existing borrowing or finance arrangements, lenders may require documents to be renegotiated or re‑executed before conversion can proceed. We regularly support clients through this process and can help keep discussions with lenders on track.

• Objects, trustee benefits, and dissolution clauses

  Changes to your charity’s objects, trustee benefit provisions, or dissolution clause cannot be made as part of the conversion itself. These amendments require prior Charity Commission consent, but this is something we frequently assist with as part of the pre‑conversion process.

• Land Registry updates

  Any registered property held by the organisation will need to be updated at the Land Registry following conversion.

• Income below £5,00

  The Charity Commission has advised that charitable companies with an annual income below £5,000 must first be registered with the Charity Commission before proceeding with conversion to a CIO.

The flip side – Why might you not convert?

While CIO conversion is attractive for many organisations, it may not be suitable in all cases. Common reasons for not converting include:

• Borrowing requirements

  If you need to secure borrowing using floating charges, remaining a charitable company or CIC may be preferable, as CIOs do not have a public register of charges, which limits their availability.

• Regulatory oversight

  For CICs in particular, it is important to note that the Charity Commission is a robust and hands‑on regulator, far more so than the CIC Regulator and with wide-ranging powers. Also, once an organisation becomes a charity, its assets are permanently held for charitable purposes and cannot be used or distributed for non‑charitable purposes, including on dissolution.

• International operations

  If you operate overseas, the CIO structure may be less familiar to funders, partners, or regulators outside the UK.

How can we help

Converting to a CIO can be an excellent option for many charitable companies and CICs - particularly small to medium‑sized organisations - but it is a significant structural change that needs to be handled carefully.

Our experienced team specialises in advising on and implementing CIO conversions, from initial scoping through to submission of the conversion application and responding to Charity Commission queries.

Whether you are ready to begin the process or simply want to explore whether conversion is right for you, we would be delighted to help. 

But what about unincorporated charities and charitable trusts?

The conversion process only applies to charitable companies and CICs, and therefore, if you are an unincorporated charity or a charitable trust, and want to operate as a CIO, you will need to register a new CIO and then transfer the assets and liabilities of the unincorporated charity/trust to the CIO following registration.  If you would like to explore this option, we would be delighted to help.

For further information or advice, please contact me.